The Future of Mandatory CSR Reporting

July 18, 2013
A glimpse into the future of mandatory Corporate Social Responsibility (CSR) reporting was revealed during an event hosted by the London Stock Exchange. The British Government presented its new disclosure requirements concerning greenhouse gas (GHG) emissions for companies incorporated in Britain and traded on regulated markets. The scope of the new regulation is considerably broader than current U.S. law and goes into effect immediately.1 In their Annual Financial Report, the British Government requires companies to disclose the amounts of six different GHG emissions that they either emit directly (Scope 1) or are emitted by others for the production of electricity, heat, steam, or coolant subsequently purchased by the company (Scope 2).2 Companies can use the methodology of their choice to measure GHG emissions, including:
  • ISO14064
  • GRI Sustainability Reporting Guidelines
  • Disclosure Project
  • Climate Disclosure Standards Board Climate Change Reporting Framework
The new regulation is based on the principle of comply or explain. Although they must reveal the “annual quantity of emissions in metric tons of carbon dioxide equivalent from activities for which that company is responsible,” firms are free to choose the organizational boundary of their disclosure based either on equity share, operational control, or financial control. It is strongly recommended to align the reporting period for GHGs with the financial reporting cycle to simplify the data monitoring and collection process. Companies are free to choose the emission intensity metric (e.g., unit revenue, unit of product, full-time equivalent employee), but the metric must apply to the whole company. If a company does not have the information necessary to meet the regulatory requirement in the first reporting year, they must either provide an estimate based on extrapolating the data they have or explain why they are unable to provide 12 months data. There is no requirement to have the data verified, but it is strongly recommended. However, the Annual Report auditors will be required to consider whether:
  • The GHG information is consistent with the financial statements
  • The information is apparently materially incorrect based on the knowledge acquired by the auditor in the course of performing the audit
The Conduct Committee of the Financial Reporting Committee will monitor compliance with the regulation. Through this legislation, the British Government is beginning the process of moving companies from compliance to material disclosure on CSR topics in their Annual Financial Report. However, participants at the event, including senior government representatives, admit that the real push for wide ranging mandatory disclosure on material CSR issues will come from the European Union that is currently preparing draft legislation. The CSR Reporting Solution powered by Wdesk provides companies a complete reporting solution for both CSR and financial information. It streamlines and optimizes the report creation, production, and publishing processes, allowing multiple users to collaborate on the report in real time. The cloud-based platform of Wdesk reduces the time and effort required to bring the document together, providing the reporting team more time to focus on material issues and sharing the company's vision. For more information about the CSR Reporting Solution, click here. Footnotes
1Since 2009, the United States Environmental Protection Agency (EPA) has required mandatory reporting of greenhouse gases from sources that in general emit 25,000 metric tons or more of carbon dioxide equivalent per year in the United States. This is inclusive of direct emitting facilities and suppliers. However, smaller sources and certain sectors such as agriculture are not currently included in this ruling. The implementation of this rule is referred to as the Greenhouse Gas Reporting Program (GHGRP). Reports are due annually on March 31 to the EPA. These reports are not required to be third-party verified however, any violation of the requirements of the GHGRP is considered a violation of the Clean Air Act. The EPA publishes the publicly available data on their publication tool, FLIGHT (Facility Level Information on GreenHouse gas Tool), designed for public use. 2In accordance with the Kyoto protocol the 6 GHG’s are carbon doxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC’s), perfluorocarbons (PFC’s), and sulphur hexafluoride (SF6).
Francis Quinn

About the author

Francis Quinn is the Director of Corporate Sustainability Technologies for Workiva. Before joining Workiva, he directed sustainable development for L’Oréal in Paris.